WASHINGTON (Kyodo) The World Bank raised its projection for Japan’s economic growth in a semiannual report released Wednesday, saying it finally has emerged from prolonged stagnation with deflation also ending on improving consumer confidence.

In its East Asia Update, the bank also revised upward its forecast for growth in emerging East Asian economies, boosted by strong export growth to China, Japan and other regional economies as well as the United States.

For Japan, the bank projects growth of 2.8 percent in 2006 in terms of real gross domestic product, unchanged from 2005 but up sharply from 1.8 percent forecast in November. The 2005 growth was up from 2.3 percent projected in November, and the 2007 expansion is expected to be 2.1 percent.

The higher-than-projected growth in 2005 confirmed assessments that Japan’s economy “has finally emerged from its more than a decade-long stagnation,” the bank said.

“Growth has been broad-based,” the report says. “Consumer confidence and spending have benefited from tighter labor markets, an upturn in wages and an ending of consumer price deflation.

“Rising consumer confidence and income have also provided a boost for residential investment,” the bank said in the report, adding that business investment has been “notably strong,” supported by “plentiful corporate profits and low borrowing costs.”

As for emerging East Asia, excluding Japan, the bank projected real GDP growth of 6.6 percent in 2006, down from 6.8 percent in 2005 but up from November’s projection of 6.2 percent. The 2005 growth was also up from 6.2 percent forecast in November, and the bank expects an expansion of 6.3 percent in 2007.

Output tumbles 1.7%

Industrial production slipped a seasonally adjusted 1.7 percent in February from the previous month for the first decline in seven months, following solid orders for items that include cosmetics and machinery in January, the Ministry of Economy, Trade and Industry said Thursday.

The index of output at mines and factories stood at 103.5 against the base of 100 for 2000, METI said in a preliminary report. The outcome was worse than market expectations of a 0.2 percent gain on the month.

The margin of decline in the reporting month was the largest since last May, when the output index fell 2.8 percent.

Despite the fall, METI maintained its basic assessment of industrial output for February, saying the activity is “gradually drifting upward” for the third straight month. A METI official said manufacturers saw no signs of major setbacks in their production activities in the month.

In February, production of items, including cosmetics, softeners, semiconductor manufacturing machines, boilers and air conditioners fell following strong demand up to January, the official said.

Output of cosmetics was sluggish after the launch of new products over the New Year period, and exports of machinery to Asian markets, including South Korea and Taiwan, declined in February. Demand for air conditioners in the month slipped after the weather got warmer, he said.

Meanwhile, production of mobile phones, digital cameras, computers, vehicles and game software rose in February due partly to the launch of new products, the official said.

The index of industrial shipments declined 2.8 percent to 105.2, for the first fall in five months, and that of industrial inventories grew 0.3 percent to 95.0 for the fourth-straight monthly rise. Increased vehicle inventories due to export adjustment to the North American market mostly pushed up the index, the official said.

Looking ahead, METI said manufacturers forecast a 0.3 percent expansion in industrial production in March and a 3.1 percent rise in April. Steady production of computers and vehicles are expected in the coming months due partly to the launch of new models, he said.

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